Duty Exemption Scheme vs Duty Remission Scheme: Which One Applies to You

What is the Difference Between Exemption and Remission?

A duty exemption scheme prevents the exporter from paying customs duty in the first place on inputs that will be used to manufacture export goods, while a duty remission scheme allows the exporter to import capital goods at a concessional rate against a future export obligation or claim back taxes and duties already embedded in the cost of goods that have already been exported.

This distinction matters because it changes your cash flow planning completely. An exemption scheme removes a cost before it happens. A remission scheme lets a cost happen and then offsets or reduces it afterward, whether through a concessional rate upfront or a credit or refund after export.

Duty Exemption Schemes Explained

• Advance Authorization: permits duty-free import of inputs that are physically incorporated into an export product, issued against a Standard Input Output Norm or through self-declaration, with an export obligation typically to be completed within 18 months
• Duty Free Import Authorisation (DFIA): works on a similar principle to Advance Authorisation but becomes transferable once the export obligation is fulfilled, giving the holder the option to sell the authorisation in the market instead of using it themselves.

Duty Remission Schemes Explained

• Export Promotion Capital Goods Scheme (EPCG): allows import of capital goods for pre-production, production, and post-production at a concessional or nil rate of customs duty, subject to an export obligation typically equal to six times the duty saved, to be fulfilled over a defined period, usually six years
• Remission of Duties and Taxes on Exported Products (RoDTEP): refunds embedded central, state and local duties and taxes that are not otherwise refunded through any other mechanism, such as duty on fuel used in transportation or electricity duty, by crediting the exporter through a transferable duty credit scrip system

What is RoDTEP?

RoDTEP is a scheme that reimburses exporters for taxes and duties incurred at various stages of production that are embedded in the cost of the exported product but are not covered under GST refund or any other existing duty drawback mechanism, issued as electronic duty credit scrips that can be used to pay basic customs duty or transferred to another importer.

Side-by-Side Comparison

Which Scheme Should Your Business Use?

If your business regularly imports raw materials or components that go directly into an exported product, Advance Authorisation is usually the most direct route to protect working capital, since it removes the duty cost before it ever hits your cash flow. If you are investing in new machinery specifically to ramp up export production, EPCG is the natural fit, since it targets capital equipment rather than consumable inputs. RoDTEP, on the other hand, is not really a choice at all in the same sense, since it applies automatically to eligible exports and functions as a baseline benefit nearly every exporter should be claiming alongside whichever exemption scheme suits their input requirements.

Can You Combine Exemption and Remission Schemes?

Can an exporter use Advance Authorization and RoDTEP together?

In most cases, yes, since Advance Authorisation addresses duty-free import of specific raw material inputs while RoDTEP addresses a separate category of embedded taxes not covered by any other refund mechanism, though certain exclusions and scheme-specific conditions apply and should be checked against the current Foreign Trade Policy notification for your product category.

A genuinely well-run export operation typically layers these schemes together rather than picking just one: Advance Authorisation for the raw materials, EPCG for the machinery investment when relevant, and RoDTEP claimed automatically on every eligible shipment. Treating them as mutually exclusive options is a common and costly misunderstanding.

Key Takeaways

Duty exemption schemes like Advance Authorisation and DFIA remove customs duty before payment is ever due, while duty remission schemes like EPCG and RoDTEP work through concessional rates or post-export credits.

Advance Authorisation suits businesses importing raw material inputs; EPCG suits businesses investing in capital goods for export production.

RoDTEP is a broad, largely automatic refund mechanism for embedded taxes not covered elsewhere, and applies to most eligible exporters regardless of which exemption scheme they also use.

These schemes are generally not mutually exclusive and a well-structured export operation often uses more than one together.

Export obligation periods differ significantly between schemes, typically 18 months for Advance Authorisation and around six years for EPCG.

FAQs

What is the main difference between a duty exemption and a duty remission scheme?

A duty exemption scheme removes customs duty before it is paid on imported inputs, while a duty remission scheme either offers a concessional rate on capital goods upfront or refunds embedded taxes after export has already taken place.

Is RoDTEP a duty exemption or duty remission scheme?

RoDTEP is a duty remission scheme, since it refunds embedded taxes and duties already incurred during production, issued as duty credit scrips after export rather than exempting anything before import.

What is the export obligation under EPCG?

The export obligation under EPCG is typically six times the duty saved on the imported capital goods, to be fulfilled over a defined period, usually around six years from the date of authorization.

Can a business use Advance Authorisation and EPCG at the same time?

Yes, a business can use Advance Authorisation for duty-free raw material imports and EPCG for capital goods imports simultaneously, since the two schemes address different categories of imported items.

Does RoDTEP apply automatically to every export?

RoDTEP applies to eligible export categories as notified under the scheme, and while the process is largely automated through shipping bill declarations, exporters should confirm their specific product falls within the notified eligible categories and rates.

Which scheme is better for a small exporter with limited capital?

For a small exporter primarily importing raw materials, Advance Authorisation typically offers the most immediate working capital relief, while RoDTEP should be claimed on every eligible shipment regardless of scale, since it requires no separate application or upfront investment.

Talk to Growthora

Choosing the right combination of duty exemption and duty remission schemes, and structuring your documentation to claim all of them correctly, can meaningfully improve your export margins. Book a free consultation with Growthora Advisory’s export compliance team.